Policy Brief: The Impact of a $10.10 Minimum Wage in Pennsylvania

Pennsylvania Governor Tom Wolf has advocated for raising the state’s minimum wage from $7.25 to $10.10 an hour. Proponents argue that a minimum wage increase will, on net, be a benefit for Pennsylvania employees. One labor union-supported think tank even projected that a higher minimum wage would create jobs in the state.

However, in a study last year, the nonpartisan Congressional Budget Office (CBO) tossed cold water on the unsupported idea that new mandates on low-margin employers won’t carry consequences. The CBO, which is cited as an expert by both Republicans and Democrats, estimated that a half-million jobs would be lost nationwide should a $10.10 minimum wage take effect. The CBO based its estimates on the results of dozens of peer-reviewed academic studies on the jobs impact of a higher minimum wage, including the latest and most up-to-date research.

In this analysis, Drs. David Macpherson of Trinity University and William Even of Miami University use Census Bureau data to replicate the CBO methodology to determine how many of those jobs would be lost should individual states such as Pennsylvania raise their minimum wage to $10.10. They also examine the family composition and household income of affected employees, to determine if the wage increase would be well-targeted to families in poverty.

Impact on Employment

According to the Bureau of Labor Statistics, approximately 189,000 people in the state currently earn at or below the federal minimum wage of $7.25. Drs. Even and Macpherson estimate that approximately 746,000 employees in Pennsylvania would be impacted by the proposed minimum wage change to $10.10. Following the CBO methodology, they estimate that roughly 30,000 jobs would be lost in the state. The policy would disproportionately impact women, who represent roughly 65 percent of the jobs lost.

Male Job Loss

Female Job Loss

Pennsylvania

10,615

19,647

Targeting to Families In Poverty

A primary focus for proponents of raising the minimum wage is reducing hardship for families in poverty. However, a study of the 28 states that raised their minimum wages between 2003 and 2007 found little associated reduction in poverty. The authors suggested that the increases were not well-targeted to families in poverty.

In Pennsylvania, the data suggests that a similar problem exists. Fewer than 10 percent of affected employee are single parents; in total, roughly 15 percent are single earners with families. By contrast, nearly two-thirds percent either live with family, or are secondary earners where both spouses work. Because so many minimum wage earners live in households where they’re either a second- or third- earner, the average family income of a beneficiary in Pennsylvania is $61,762.

Single Adult

Single Parent

Married Sole Earner

Married Dual Earner

Living With Family or Relative

Pennsylvania

19.6

7.8

6.9

19.5

46

Better Alternatives

While the empirical research suggests that a higher minimum wage is an ineffective means to reduce poverty, the verdict on state supplements to the federal Earned Income Tax Credit (EITC) is much different. One recent study from economists at San Diego State University and the University of Georgia found a one percent reduction in a state’s poverty rate for each one percent increase in its supplement to the EITC. Unfortunately, while many of Pennsylvania’s neighboring states–including New York and New Jersey–offer a state supplement to the federal Earned Income Tax Credit (EITC), Pennsylvania does not. Creating a credit like this is a better place for the state to start if it’s truly interested in reducing poverty.

A note on the methodology

This analysis relies on Census Bureau Current Population Survey data from December 2013 to November 2014. It follows the methodology that the CBO detailed in an appendix to its 2014 report. The analysis assumes that workers in 2014 would realize wage growth of 2.9 percent between 2014 and the implementation of a higher minimum wage. It also assumes that workers in 2015 who earned between the 2014 and 2015 minimum wage would have a wage increase to the new minimum.

Workers affected by the $10.10 minimum are those with wages in 2015 that are between the state minimum for 2015 (and up to $.25 below the minimum) and $10.10. Hourly wage is the reported hourly wage for hourly workers, but it’s measured as weekly earnings divided by weekly hours for non-hourly and workers who report receiving tips, overtime, or commissions. The estimates above are based on legislated values as of August 1st, 2015.